NZ steps up trade-deal campaign

By FRAN O'SULLIVAN assistant editor

The Government plans to put more horsepower into its campaign for a United States free trade deal which is forecast to bring in at least an extra $1 billion each year to the New Zealand economy.

High-level contacts between the Government and influential US Congress figures will be stepped up in the three months before negotiations on a bilateral deal between Australia and the US formally begin next year.

Prime Minister Helen Clark admits it would "be optimistic" for New Zealand to build a case to join the Australian negotiations within that period.

But she said the Government intended to take heed of United States Trade Representative Bob Zoellick's intention to consult Congress over the New Zealand case given the strong integration of the two transtasman economies.

The Opposition has warned the economy will suffer if Australia gets a trade deal with the US and New Zealand misses out.

Government-commissioned studies released yesterday predicted negative effects if New Zealand was excluded from a US-Australian trade deal.

One study predicted the minimum drop in New Zealand's economic welfare would be "negative, but very small, equating to 0.03 per cent of GDP".

But Helen Clark said the reports were "quite academic" given the US signal to New Zealand to step up its lobbying.

The Washington-based United States New Zealand Council is bringing a delegation - expected to include five Congressmen and women - to NZ in January.

The group, which will include influential members of the council's advisory board, will meet senior Cabinet ministers, Ministry of Foreign Affairs and Trade officials and US Embassy staff.

The delegation will also be hosted at an Auckland reception.

Three other influential Congressmen are expected to be hosted in New Zealand within the next few months.

Trade Negotiations Minister Jim Sutton is also holding talks with Ambassador Zoellick.

Ascribing a dollar value to a US free trade deal is not a simple task as any arrangement has dynamic effects. Finance Minister Michael Cullen has suggested it could be worth an extra $1 billion each year.

But other players, such as Fonterra chief executive Craig Norgate - who also chairs the New Zealand United States Council - believes dynamic multiplier effects could be at least double that figure.

A report by Fred Bergsten, the Washington-based director of the influential Institute for International Economics, has forecast New Zealand's merchandise exports to the US are expected to rise by US$732 million or 51 per cent under a bilateral deal, or US$703 million (49 per cent) under a trilateral arrangement.

The US would gain a 25 per cent increase in its merchandise exports to New Zealand. If a three-way deal is struck, the US could increase merchandise exports to this part of the world by US$3 billion ($6.9 billion).

The report, titled The Case for a Model Free Trade Agreement between the United States and New Zealand issued earlier this year, concluded that a "compelling case" exists for an early start to negotiations for a free trade agreement.